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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 11-K


(Mark One)

[X]     ANNUAL REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM       TO      

COMMISSION FILE NUMBER 1-9910

WESTCORP EMPLOYEE STOCK OWNERSHIP AND SALARY SAVINGS PLAN

(FULL TITLE OF THE PLAN)


WESTCORP

23 PASTEUR
IRVINE, CALIFORNIA 92618-3804

(NAME OF ISSUER OF THE SECURITIES HELD PURSUANT
TO THE PLAN AND THE ADDRESS OF ITS
PRINCIPAL EXECUTIVE OFFICE)



 


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SIGNATURE
EXHIBIT 23.1
EXHIBIT 32.1
EXHIBIT 32.2


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REQUIRED INFORMATION

1.   Not Applicable.
 
2.   Not Applicable.
 
3.   Not Applicable.
 
4.   Westcorp Employee Stock Ownership and Salary Savings Plan (the “Plan”) is subject to the requirements of the Employee Retirement Income Security Act of 1974 (“ERISA”). Attached hereto is a copy of the most recent financial statements and schedules of the Plan prepared in accordance with the financial reporting requirements of ERISA.

 


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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Westcorp Employee Stock Ownership and Salary Savings Plan has duly caused this Annual Report to be signed by the undersigned thereunto duly authorized.

         
  WESTCORP EMPLOYEE STOCK OWNERSHIP
AND SALARY SAVINGS PLAN
 
 
June 29, 2004  By:   /s/ Lee A. Whatcott    
         Lee A. Whatcott   
         Executive Vice President,
     Chief Financial Officer and
     Chief Operating Officer 
 

 


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Audited Financial Statements
and Supplemental Schedules

Westcorp Employee Stock Ownership and Salary Savings Plan

Year ended December 31, 2003
with Report of Independent Auditors

 


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Westcorp
Employee Stock Ownership and Salary Savings Plan

Audited Financial Statements and Supplemental Schedules

Year ended December 31, 2003

Contents

         
Report of Independent Registered Public Accounting Firm
    1  
Audited Financial Statements
       
Statements of Net Assets Available for Benefits at December 31, 2003 and 2002
    2  
Statement of Changes in Net Assets Available for Benefits for the Year Ended December 31, 2003
    3  
Notes to Financial Statements
    4  
Supplemental Schedules
       
Schedule H, Line 4i – Schedule of Assets (Held at End of Year)
    10  
Schedule H, Line 4j – Schedule of Reportable Transactions
    11  

 


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Report of Independent Registered Public Accounting Firm

Plan Committee
Westcorp Employee Stock Ownership and Salary Savings Plan

We have audited the accompanying statements of net assets available for benefits of the Westcorp Employee Stock Ownership and Salary Savings Plan as of December 31, 2003 and 2002, and the related statement of changes in net assets available for benefits for the year ended December 31, 2003. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2003 and 2002, and the changes in its net assets available for benefits for the year ended December 31, 2003, in conformity with U.S. generally accepted accounting principles.

Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) and schedule of reportable transactions as of December 31, 2003 are presented for purposes of additional analysis and are not a required part of the financial statements but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole.

   
 
/s/ ERNST & YOUNG LLP

Irvine, California
June 16, 2004

1


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Westcorp
Employee Stock Ownership and Salary Savings Plan

Statements of Net Assets Available for Benefits

                 
    December 31,
    2003
  2002
Assets
               
Investments at fair value:
               
Cash and short-term investments
  $ 4,507,406     $ 4,410,739  
Westcorp common stock
    65,497,782       39,502,557  
Mutual funds
    23,961,889       15,464,100  
Loans to participants
    1,284,663       825,885  
 
   
 
     
 
 
Total investments
    95,251,740       60,203,281  
 
Employee deferrals receivable
          194,855  
Employer contribution receivable
    1,803,123       294,361  
 
   
 
     
 
 
Total receivables
    1,803,123       489,216  
 
   
 
     
 
 
Net assets available for benefits
  $ 97,054,863     $ 60,692,497  
 
   
 
     
 
 

See accompanying notes.

2


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Westcorp
Employee Stock Ownership and Salary Savings Plan

Statement of Changes in Net Assets Available for Benefits

For the Year Ended December 31, 2003

         
Additions
       
Contributions:
       
Employee
  $ 5,746,565  
Employer
    6,914,431  
 
Net investment income:
       
Interest income
    177,026  
Dividends
    1,101,992  
Net realized and unrealized appreciation
    31,420,997  
 
   
 
 
Total additions
    45,361,011  
 
Deductions
       
Benefit and withdrawal payments to participants
    8,998,645  
 
   
 
 
Net increase
    36,362,366  
Net assets available for benefits:
       
Beginning of year
    60,692,497  
 
   
 
 
End of year
  $ 97,054,863  
 
   
 
 

See accompanying notes.

3


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Westcorp
Employee Stock Ownership and Salary Savings Plan

Notes to Financial Statements

December 31, 2003

1. Description of the Plan

The following description of the Westcorp Employee Stock Ownership and Salary Savings Plan (the “Plan”) is provided for general information purposes only. Participants should refer to the plan document for a more complete description of the Plan’s provisions.

General

The Plan, as amended and restated, is a defined contribution profit sharing plan that covers substantially all employees of Westcorp and its subsidiaries, and provides for retirement benefits. It is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

Within the Plan, there are two parts, the Employee Stock Ownership Plan (“ESOP”) and the Salary Savings Plan (“SSP”). Westcorp and its subsidiaries (the “Company”) make contributions to these parts as determined by the Plan document, the Company’s Board of Directors, and within the guidelines of ERISA and the regulations of the Internal Revenue Service.

Vesting

Participants are immediately vested in their contributions and ESOP dividend reinvestment account plus actual earnings thereon. Vesting in the Company’s matching and discretionary contribution portion of their accounts plus actual earnings thereon is based on years of service. The participants vest as follows:

                 
    Vested Interest
Years of Service
  ESOP
  SSP
Less than 1
    0 %     0 %
1
    20 %     30 %
2
    40 %     60 %
3
    60 %     100 %
4
    80 %        
5 or more
    100 %        

4


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Westcorp
Employee Stock Ownership and Salary Savings Plan

Notes to Financial Statements (continued)

1. Description of the Plan (continued)

Vesting (continued)

A participant is 100% vested after five years of service for the ESOP and three years of service for the SSP, or upon attainment of age 65 or in the event of a participant’s death or total disability while still an employee of the Company. Forfeitures are used to reduce the Company’s contributions.

It is the intent of the Company to continue the Plan; however, the Plan may be terminated by the Company at any time. In the event the Plan terminates, the net assets of the Plan will be fully allocated. All participants will vest 100% immediately and will receive their credited balance as of the date of liquidation.

Employee Contributions

Employees may contribute up to 50% of annual earnings, subject to the 2003 limit of $12,000 per the Internal Revenue Code Section 401(g), to the Plan through regular payroll deductions under the 401(k) provisions of the Plan.

Employer Contributions

Employer contributions under the ESOP are at the discretion of the Company’s Board of Directors. Employer contributions for the SSP are matched 100% of the first $500 contributed by the participant to the Plan, and then 50% of participant contributions, not to exceed 6% of participant annual compensation (see Note 6).

Loans to Participants

The Plan allows employees to borrow from their Plan accounts, excluding the ESOP portion. A minimum loan amount of $1,000 can be borrowed once a year. The maximum loan amount is 50% of the employee’s vested Plan account balance not to exceed $50,000 at the time the loan is made. Loans are required to be repaid within five years; however, if the purpose of the loan is to purchase a primary residence, the term may be up to 30 years. The loans bear interest at one percent plus the prime rate for the month previous to the loan date. Each loan is secured by the participant’s vested interest remaining in the Plan.

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Westcorp
Employee Stock Ownership and Salary Savings Plan

Notes to Financial Statements (continued)

1. Description of the Plan (continued)

Loans to Participants (continued)

Repayments of loan amounts are used to reduce the outstanding principal balance of the loan. Such principal reductions are then allocated among the 11 investment options in the same proportion in which the individual employee’s elective contributions are allocated at the time of loan repayment.

2. Significant Accounting Policies

Basis of Presentation: The accompanying financial statements have been prepared on the basis of U.S. generally accepted accounting principles.

Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Contributions and Deductions: Contributions by Plan participants are recognized as additions to net assets when the deduction is made from the participants’ wages at the end of each payroll period. In 2002, the Company amended the Plan setting limits on annual participant contributions and limiting annual participant compensation used for Plan allocation purposes. Company contributions for the ESOP portion of the Plan are discretionary. Company contributions are accrued in the year in which they become obligations of the Company by authorization of its Board of Directors.

Benefits due to terminated participants and participant withdrawals are recorded on the date distributions are made.

Investment Valuation and Income Recognition: The Plan’s investments are stated at fair value. The shares of registered investment companies are valued at quoted market prices which represent the net asset values of shares held by the Plan at year-end. The common stock shares of Westcorp are valued at their closing price on the New York Stock Exchange as of December 31, 2003 and 2002, respectively. Loans to participants and cash are valued at cost which approximates fair value.

Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

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Westcorp
Employee Stock Ownership and Salary Savings Plan

Notes to Financial Statements (continued)

3. Investments

The following investments represented five percent or more of the Plan’s net assets:

                 
    December 31,
    2003
  2002
John Hancock Large Cap Value Fund
  $ *     $ 3,370,733  
American Mutual A
    5,079,913       *  
Westcorp common stock
    65,497,782       39,502,557  
John Hancock Stable Value Trust Fund
    *       3,754,703  
American Funds AMCAP Fund
    6,392,274       3,878,227  

*   Investment balance is less than 5% of the Plan’s net assets.

The Plan’s investments (including investments bought, sold and held during the year) appreciated in fair value during 2003 as follows:

         
Investments at fair value as determined by quoted market prices:
       
Westcorp common stock
  $ 27,303,274  
Mutual funds
    4,117,723  
 
   
 
 
Net appreciation in fair value of investments
  $ 31,420,997  
 
   
 
 

4. Income Tax Status

The Plan has received a determination letter from the Internal Revenue Service dated February 1, 2002, stating that the Plan is qualified, in form, under Section 401(a) of the Internal Revenue Code (“the Code”) and, therefore, the related trust is exempt from taxation. Subsequently to receiving the determination letter the Plan was amended. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator believes the Plan is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt.

5. Administrative Costs

The Company agreed to voluntarily pay the Plan’s administrative expenses of approximately $76,542 and $58,232 in 2003 and 2002, respectively. The agreement to pay the administrative costs may be canceled at any time.

7


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Westcorp
Employee Stock Ownership and Salary Savings Plan

Notes to Financial Statements (continued)

6. Employer Contributions

In 2003, the Company’s Board of Directors elected to provide a contribution to the ESOP and SSP of $5,111,308 and $2,303,123 respectively. The SSP contribution was partially offset by forfeitures of $500,000. At December 31, 2003, unallocated forfeitures totaling $659,678 remain in the Plan and available to the Company for future use.

7. ESOP Participant Allocation

The Plan allocates contributions, investment changes and forfeitures to participants’ ESOP accounts as follows:

Contributions: Each participant is credited with one unit for each $100 of eligible compensation plus an additional unit for each full year of service. These units are summarized and form the basis for the participant’s pro-rata contribution. All ESOP employer contributions credited to employees are invested in the Company’s common stock.

Investment Changes: Each participant account is allocated the amount of investment changes on a daily basis in the same proportion that the cash or shares of each participant’s account bears to the total accounts of all participants in the same investment option at the time of the valuation.

Forfeitures: Forfeitures are held within the Plan and can be used to offset employer match to the SSP and employer contributions to the ESOP.

8. Nonparticipant-Directed Investments

Information about the net assets and the significant components of the changes in net assets relating to nonparticipant-directed investments are as follows:

                 
    December 31,
    2003
  2002
Net assets:
               
Cash and short-term investments
  $ 195,225     $ 587,033  
Westcorp common stock
    53,487,716       32,552,569  
 
   
 
     
 
 
 
  $ 53,682,941     $ 33,139,602  
 
   
 
     
 
 

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Westcorp
Employee Stock Ownership and Salary Savings Plan

Notes to Financial Statements (continued)

8. Nonparticipant-Directed Investments (continued)

         
    For the
    Year Ended
    December 31,
    2003
Beginning balance
  $ 33,139,602  
Changes in net assets:
       
Employer contributions
    5,111,308  
Transfers, net
    (1,630,643 )
Investment income
    719,903  
Net realized and unrealized appreciation in fair value
    21,673,793  
Benefits paid to participants
    (5,331,022 )
 
   
 
 
Ending balance
  $ 53,682,941  
 
   
 
 

9. Holdings of Parties-in-Interest

The Plan has holdings of securities of parties-in-interest as follows:

                 
    December 31,
    2003
  2002
Westcorp common stock
(1,844,296 and 1,880,998 shares in 2003 and 2002, respectively)
  $ 65,497,782     $ 39,502,557  
 
   
 
     
 
 

10. Risks and Uncertainties

The Plan provides for various investments in mutual funds, collective trust funds, Westcorp common stock, and other investments. Investments in general are subject to various risks, such as interest rates, credit and overall market volatility risks. The Plan’s exposure to credit loss in the event of nonperformance of investments is limited to the carrying value of such investments.

Due to the level of risk associated with certain investments, it is reasonably possible that changes in the value of investments could occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.

9


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Supplemental Schedules

 


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Westcorp
Employee Stock Ownership and Salary Savings Plan

Employer ID 510308535 Plan #001

Schedule H, Line 4i – Schedule of Assets (Held at End of Year)

December 31, 2003

                                                 
            ESOP
  SSP
  Total
Shares or               Current           Current   Current
Par Value
  Identity of Issue
  Cost**
  Value
  Cost**
  Value
  Value
       
Mutual Funds
                                       
  62,242    
John Hancock Equity Fund
                          $ 1,578,073     $ 1,578,073  
  96,612    
AIM Balance Fund
                            2,310,350       2,310,350  
  188,614    
American Century International Fund
                            1,491,891       1,491,891  
  208,453    
American Mutual A
                            5,079,913       5,079,913  
  215,121    
John Hancock Government Income Fund
                            2,020,819       2,020,819  
  187,151    
John Hancock Mid Cap Growth Fund
                            1,625,585       1,625,585  
  153,732    
John Hancock Small Cap Growth Fund
                            1,341,850       1,341,850  
  551,409    
John Hancock Technology Fund
                            2,121,134       2,121,134  
  379,692    
American Funds AMCAP Fund
                            6,392,274       6,392,274  
       
 
                           
 
     
 
 
       
Total Mutual Funds
                            23,961,889       23,961,889  
 
       
Common Stock
                                       
  1,844,296    
Westcorp*
  $ 31,674,738     $ 53,487,715     $ 7,529,097       12,010,067       65,497,782  
 
       
Participant Loans Receivable
                                       
$ 1,284,663    
Participant loans*, 5.00% to 10.50% through 2033
                            1,284,663       1,284,663  
 
       
Short-Term Investments
                                       
$ 3,858,688    
John Hancock Stable Value Trust Fund
                    3,858,688       3,858,688       3,858,688  
$ 648,718    
Cash
    195,225       195,226       453,492       453,492       648,718  
       
 
           
 
             
 
     
 
 
       
Total Short-Term Investments
            195,226               4,312,180       4,507,406  
       
 
           
 
             
 
     
 
 
       
Total Investments
          $ 53,682,941             $ 41,568,799     $ 95,251,740  
       
 
           
 
             
 
     
 
 

* Investment with a party-in-interest.

** Cost of nonparticipant-directed investments.

 


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Westcorp
Employee Stock Ownership and Salary Savings Plan

Employer ID 510308535 Plan #001

Schedule H, Line 4j – Schedule of Reportable Transactions

Year Ended December 31, 2003

                                                     
                                        Current Value    
Identity of   Description of Asset                   Expense           of Asset on    
Party   (Including Interest Rate and   Purchase   Selling   Incurred with   Cost of   Transaction   Net Gain
Involved
  Maturity in Case of Loans)
  Price
  Price
  Transaction
  Asset
  Date
  (Loss)
Single transactions in excess of 5% of beginning plan assets:                
Westcorp
  Contribution of common stock   $ 5,111,308     $    —     $     $ 5,111,308     $ 5,111,308     $    —  

 


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EXHIBIT INDEX

     
Exhibit 23.1
  Consent of Independent Auditors
 
   
Exhibit 32.1
  Certification Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
   
Exhibit 32.2
  Certification Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002